A corporation reports the following year-end balance sheet data.The company's debt ratio equals: $$\begin{array} { l r l r r }
\text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 5,000 \
\text { Accourts receivable } & 55,000 & \text { Long-temn liabilities } & 35,000 \
\text { Irventory } & 60,000 & \text { Cormon stock } & 100,000 \
\text { Equiprment } & \underline{145,000} & \text { Retaired earnirgs } & \underline{90,000} \
\text { Total assets } & \underline{\$ 300,000} & \text { Total liabilities ard equity } & \underline{\$ 300,000}
\end{array}$$
A)0.58
B)1.27
C)2.07
D)0.37
E)0.63

Question

A corporation reports the following year-end balance sheet data.The company's debt ratio equals: $$\begin{array} { l r l r r } 
\text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 5,000 \
\text { Accourts receivable } & 55,000 & \text { Long-temn liabilities } & 35,000 \
\text { Irventory } & 60,000 & \text { Cormon stock } & 100,000 \
\text { Equiprment } & \underline{145,000} & \text { Retaired earnirgs } & \underline{90,000} \
\text { Total assets } & \underline{\$ 300,000} & \text { Total liabilities ard equity } & \underline{\$ 300,000}
\end{array}$$
A)0.58
B)1.27
C)2.07
D)0.37
E)0.63

Quizplus · Accepted Answer

The debt ratio is calculated as total liabilities divided by total assets. Here, total liabilities are $5,000 (current liabilities) + $35,000 (long-term liabilities) = $40,000. Total assets are $300,000. Thus, the debt ratio = $40,000 / $300,000 = 0.1333, which rounds to 0.13, not matching any of the provided options. However, based on the options given, the closest and most plausible interpretation would be a mistake in the calculation or option presentation. Re-evaluating the options and the context, it seems there might have been an error in interpreting the correct answer based on the provided calculation. The correct approach to finding the debt ratio indeed involves dividing the total liabilities by the total assets, but none of the options correctly reflects the calculated ratio of 0.1333. Given the options, there might have been a misunderstanding in the question's expectation or a misprint in the options.

A Corporation Reports the Following Year-End Balance Sheet Data A)058 B)1

A Corporation Reports the Following Year-End Balance Sheet Data A)058
B)1